The storied Lord & Taylor chain received a stay of execution yesterday, when it was acquired for $1.2 billion by a team of real estate developers who promised to continue the brand’s turnaround.

The acquisition is the latest example of real estate developers gobbling up tired retail brands, such as Toys ‘R’ Us and Linens ‘N Things, in the hopes of a turnaround, but with the underlying value of the real estate serving as protection should the deal go sour.

The future of the 180-year-old Lord & Taylor had been in doubt since January, when parent Federated Department Stores, which inherited the chain through its purchase last year of the May Department Stores Company, put it up for sale to focus on its Macy’s and Bloomingdale’s name plates.

Lord & Taylor’s new owner, NRDC Equity Partners, a partnership between Apollo Real Estate Advisors and National Realty & Development Corp., said it had no current plans to close stores or layoff employees.

Jane Elfers, Lord & Taylor’s president and chief executive, is to continue with her strategy to revive the chain by taking it more upscale with a greater focus on exclusive merchandise.

“We are hopeful that once Lord & Taylor is freed from a larger company it will blossom,” said Richard Baker, National Realty’s president and the son of its chairman and founder Robert Baker.

Despite those assurances, several observers, including some who make clothing that is sold in Lord & Taylor’s stores, said they were skeptical the new owners would be able to turn around a business that has struggled for years.

The new owners are currently analyzing Lord & Taylor’s 48 stores, slightly more than half of which are owned by the retailer, including the flagship on Fifth Avenue, which analysts have valued at $400 million.

One likely possibility, analysts said, would convert a portion of the Fifth Avenue store into luxury condominiums.

Perhaps as many as 10 additional Lord & Taylor locations could be sold or closed, a source said.

“The idea is to make the best attempt to operate the business, but if that fails, they can always sell the real estate,” said Howard Davidowitz, chairman of consulting and investment banking firm Davidowitz & Associates.

Though Lord & Taylor lost market share for years under the May Company, which took it down market, the chain has continued to make money, sources said. Federated does not break out numbers for the division, but sources say that earnings have grown in the last few years.

The deal for Lord & Taylor, which was approved yesterday by Federated’s board of directors, shifts the spotlight to an unlikely white knight for ailing retailers.

In February, Linens ‘N Things was bought by National Realty, which manages 14 million square feet of retail space, and which teamed up with private equity shop Apollo Management, founder of Apollo Real Estate Advisors, for the deal.

Baker said NRDC is on the hunt for more acquisitions.

Even before Federated had officially put Lord & Taylor up for sale, National Realty had spent about six months doing due diligence on the deal, believing that a divestiture was imminent. That gave it a leg up over other competitors, mostly combinations between private equity and real estate firms, sources said.

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Shopping spree

Family-owned NRDC and partner Apollo Real Estate Advisors have their sights set on bagging more big retailers to add to Lord & Taylor and Linens ‘N’ Things.

National Realty & Development Corp. up close:

* Owners and developers of more than 14M square feet of shopping centers